Is help to buy worth it?

[DiscombobulatedAf]

Hi all,
I’m looking in to help to buy mainly due to only needing a 5% deposit. I’ve been reading up on the pros and cons and can’t decide if it’s worth it. I’m looking at one bed flats and they’re mostly priced between £250 and £300k. I do feel like this is overpriced but I understand you pay a premium when it comes to new builds. I’m worried about selling at a loss a few years down the line. I’m in London btw. Would love to hear from those that used the scheme and whether or not you think it’s worth it. Also this might be a silly question but where do you find help to buy properties online? I’ve seen a few on right move but I’m struggling to find any beyond that. Thanks!

Our broker said two things about HTB. One, that financially it was only worth doing if you couldn't get a place without it (except for in very rare circumstances).

And two, the government has made a fortune from the scheme, that's why they run it!

I do feel like this is overpriced but I understand you pay a premium when it comes to new builds. I’m worried about selling at a loss a few years down the line
This. HTB is only available for new-builds, which cost more than existing housing stock of the same spec. You are receiving with one hand but giving away with another.

Thank you both. I’m considering saving for a bit longer and just going down the normal route. I’ll have 15k saved by May and could have 20k by October so maybe I should just save for a bit longer and spare myself the hassle of HTB

I agree that’s it’s only worth doing if you can’t buy a property normally. There is premium for having everything brand new and shiny + you need to find the rest of the money at the end of the 5 years.

Personally, I’d be tempted if my deposit was tiny and the choice was between HTB or renting and saving for another few years.

If you’ve got a bit more deposit, you could look at buying a cheaper property normally- I think 200k-ish could get you a studio/one bed in a decent place in outer London.

My plan was to sell or remortgage before the 5 years was up. I’m mid twenties and currently living at home and paying £150 in rent I appreciate that’s tiny but that’s all I was asked for. I’m currently saving £1000 a month for my deposit so maybe I should just be patient and save for a bit longer

I wouldn’t bank on selling before the 5 years is up as that will put a lot on pressure on you and who knows what the market will be like. If you’re happy and you’re parents are happy with the current arrangement, it probably does make sense to save up for a deposit although I hear they ask for 15% these days

I read a quotation once by Somebody in Property that said, basically, you seldom make money selling at a high price; you make money by buying at a low price.
Don't rush it. You are a FTB which means that you get favourable treatment for Stamp Duty purposes. Don't squander that benefit! Keep your eye on the market and wait for the right one to come along.

I think that new builds are over priced specifically because of HTB.

If you need / want to remain in London and have little to no chance of being able to buy on the open market because you can’t get a large enough deposit together to make your income multiple work for a mortgage then yes - Help to Buy is an excellent alternative to renting where you will see no return on the money it costs you every month.

That doesn’t seem the case for you if you’re confident the £20K you’ll have saved by October will give you enough of a deposit to buy a much better place on the open market; but if that’s so then I’d hold out for that. £250k for HTB newbuild sounds very cheap; as does less than that for a one-bed pretty much anywhere in London.

I agree that you should look at what you could buy that isn't new build and in cheaper areas too. Consider how long it would take you to get to the 10% or 15% deposit you need for these cheaper properties. If it's not a ridiculous amount of time, keep saving.

Op, can you tell us how much you could buy a property for that isn't new build in that cheaper area (one that still works for you, even if not your preferred location) and also how much you will need than the deposit already saved? It might not be as much as you think as the 5% for HTB new build is of a bigger amount.

Some people find that when they speak to their family about the deposit they've already saved and if it is just a couple of grand more needed to reach the minimum LTV for non-HTB, their family can lend them it or gift it to them. I'm not talking about families who give their kids £30k plus for a deposit, but situations where someone might have saved really hard and got £10k together but needs £13k to avoid HTB and to have the deposit needed for non HTB and when their family knows the situation, can manage to get together £3k or similar that will make all the difference. Might not be relevant for Op, but lots of families can manage to give their kids a little bit (a couple of grand) which can make all the difference.

It's good you're looking at this Op. It suggests you are money-savvy. Too many people are lured in by the idea of small deposit and shiny new-build and don't really look at the alternatives which are probably cheaper but need a bit more upfront.

I bought a 1 bed four years ago, looked at staying in London. My max budget was 220k, and I ended up in Hertfordshire because I could barely afford anything, and what I could afford was absolutely grotty in an awful area miles from a tube or train.

If you can afford (money and time) to commute in you will get loads more for your money. 20k as a 10% deposit would get you something small and nice in Hertfordshire or Essex. I’m 20 minutes to a London tube and 30 minutes to central London from where I currently live in herts.

Alternatively I have friends who bought one beds in east London areas on help to buy who love them. Nice modern flats for similar money to what you’ve stated.

I think you can do London help to buy, or commuter belt with a traditional route, but not London traditional route with that money. It’s so hard, I remember trying to make that decision and it was very stressful.

Love the comment about making money by buying cheap, not selling high.

Consider the doer-upper as well....definitely not new and shiny, but priced to sell and scope to add value by doing the work. It's not for everyone, but those with some vision, basic skills and willingness to put in hard graft, it's a way to either get more for your money or to get onto the ladder when it wouldn't be possible otherwise.

I think you can do London help to buy, or commuter belt with a traditional route, but not London traditional route with that money.

Not zones 2-3 but I can see smaller but attractive one-beds in good locations for about 220k near me in zone 5. The cheapest new (conversion from an office block) is a studio for 185k - around the corner from nice shops and restaurants, a lovely park and 2 mins from a station.

I wouldn't do it unless I had to, I especially wouldn't do it right now, and I double especially wouldn't do it to buy a one bed flat in London. You're in a great position. I know you probably feel desperate to get your own space, but I really would stick it for another 6 months, see how things look and reap the benefits of having a bigger deposit.

Thank you for all of your responses they’ve been really helpful. My mum could potentially help me out but I’d prefer to do it alone as I want to be independent and don’t want to feel like I owe anyone. However if she offered I definitely wouldn’t say no! I’ve managed to save 7k since March. So will have 20k by October if I carry on saving 1k a month. Now wondering if I should save more as my disposable/fun money for the month is £800 but I don’t really need all of that at the moment due to working from home. I’ve been looking at east/north London but I don’t love the areas that are coming up. 220k is the max I could afford on the open market. I really want to stay in London and it’s unlikely I’ll be able to do that if I go down the traditional route hence why I’m looking at HTB. I’d love to live near Leytonstone as I really like the area but there’s very little in my price range but I appreciate things could change by next year. I’m finding it very hard to decide and it’s stressing me out a little. I really want to buy by next Christmas. Also open to a place that needs work if the renovation price isn’t extortionate

I’ve just had a look on Rightmove and it looks like Leytonstone should be just about doable without a scheme.
800 sounds like quite a lot of fun money so you could as well save more.

Yes, £800 fun money is a lot for someone saving hard for a deposit. I would look to halve it or save a further £500 at least.

Within reason, it's good to be a bit flexible about area. You don't have to absolutley love it....that's a luxury most first time buyers can't really afford...and it's not worth going for HTB and its disadvantages if you can get somewhere without it, which still ticks most of your boxes.

Don't be shy with your parents. Sharing with them how much you've saved (they will be impressed, especially if you cut the fun money and show you're willing to really cut back for a while) and the different prices and deposits required for HTB compared to a conventional route, might show them that just a couple of extra grand from them could make the difference. You don't need to ask for money or expect it, but many parents who have some money would be more than glad to give a couple of grand to help their child. I know that not everyone can do this, but you don't sound in this position. I think if you'll have dsaved £20-25k, then you can still hold your head up and feel you've saved hard, even if given an extra couple of grand to get you over the threshold. If it makes the difference between HTB and traditional route, it really would be great.

Op, you sound in a good position. HTB is clearly a possibility in your mind, but you also have the option to avoid it....you've saved a good chunk already, plan to save more, plus have the capacity to save even more via your fun fund being cut down, which you can easily do. Given all these positives, you really don't sound like you NEED to go for HTB. For some people, it really is the only option as they have very limited deposit and little chance of saving much more in a reasonable timeframe...but you're not in this position. It's just a question of whether you're tempted by the low deposit you can afford now and the shiny new and possibly the location, which are short term benefits with longer term costs associated with them, vs the longer saving period and less shiny place and possibly location, but longer term benefits and cheaper costs in the end.

Thanks @JoJoSM2 I’ve had another look and increased the budget to 230k and there are more options near Leyton and Walthamstow. Yes I agree I could save more of the £800 and will try to from now on. Looks like I’ll have to save for a few extra months and push my deposit to £23k

Sorry to raise this, but don't forget there are costs of solicitors, surveys and moving...prob in the region of £1.5 -2k ish I'd think, assuming you won't need full removals. At least you'll avoid stamp duty and estate agent fees.

No need to apologise @WombatChocolate I won’t need full removals just a small van for my desk and armchair And possibly a medium sized chest of drawers. I can put my clothes in suitcases and will make multiple trips to keep costs down. I’m fortunate to be getting a £3k bonus in March and will use that to cover legal costs and surveys

Don’t do it. We did and hugely regret it. We actually had a 20% deposit but got talked into taking a further 20% by the sales team.
They are very good at sweet talking you...

Oh wow that’s awful @Shadowboy I’m now definitely leaning towards saving more and buying on the open market

I wouldn't if you want to sell within 5 years. 10 at least to avoid negative equity.

£800 a month is a LOT of fun money, you must earn about 2k a month with your rent+saving+disposable income, a few more hundred pounds of savings is definitely doable. Also prices for flats may fall over the next few months so I would wait and see what happens (redundancies, furlough, Brexit)

@DiscombobulatedAf the problem comes when you want to sell. If the sale price is lower than the RICS property valuation you end up footing the bill. In addition it costs £200 in redemption costs to Helptobuy and a further £250 for the survey. It also adds another month to the sales process. I’m just hoping our buyer hangs in there...